Where the arguments usually start
Sellers often believe the buyer's decisions, such as cutting the sales team, shifting customers to another product line, or changing pricing, depressed the results that determined the earnout. Buyers usually answer that they had the right to run the business as they saw fit after closing. The purchase agreement controls much of this: whether it requires the buyer to use certain efforts, prohibits specific actions, or expressly allows the buyer full discretion. Courts generally will not add operating duties the contract left out, though a buyer acting specifically to avoid paying the earnout can raise separate issues. Accounting disputes over revenue recognition, cost allocation, and definitions are just as common.
Contracts and data to assemble
Start with the purchase agreement, the earnout schedule, any accounting principles referenced in it, and any disclosure schedules. Collect the earnout statement and supporting calculations the buyer delivered, and any information you have about post-closing operations. If you stayed on as an employee or consultant, your role and access to company information may be relevant, but be careful about copying company files to personal accounts; ask first how to preserve what you need. Board materials, budgets, and integration plans from before closing can show what both sides anticipated. Emails exchanged during negotiation of the earnout terms may also help explain what disputed definitions were meant to cover.
Deadlines and dispute mechanisms
Many purchase agreements set a short period to object to the earnout statement and require a written notice that identifies the disputed items. Missing that window can limit what you can raise later. Accounting disagreements are often sent to an independent accountant whose determination is binding, while other claims, such as breach of operating covenants, may go to court or arbitration. In an early review we identify which disputes fall into which path, whether the agreement is governed by New York or Delaware law, and what information you can request from the buyer before the deadline passes.
